

 Jemimah McDaniel
 7 years ago
 Views:
Transcription
1 Page 1 of Assume the price elasticity of demand for U.S. Frisbee Co. Frisbees is 0.5. If the company increases the price of each Frisbee from $12 to $16, the number of Frisbees demanded will Decrease by 14.3 percent. Decrease by 33.3 percent. Increase by 20.0 percent. Increase by 7.0 percent. Price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. From that, one can manipulate the formula to compute the percentage change in quantity demanded by multiplying the price elasticity of demand by the percentage change in price. Therefore the percentage change in quantity is equal to %  percentage change in price using the midpoint formula ((1612)/(( )/2)). Difficulty: 3 Hard 2. Assume the price elasticity of demand for JT Chip Co. chips is 4.0. If the company decreases the price of each bag of chips from $1.89 to $1.49, the number of bags sold will Decrease by 78 percent. Increase by 95 percent. Increase by 48 percent. Increase by 78 percent. The price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. From that, one can manipulate the formula to compute the percentage change in quantity demanded by multiplying the price elasticity of demand by the percentage change in price. Therefore the percentage change in quantity is equal to 4 24%  the percentage change in price using the midpoint formula (( )/(( )/2)). Difficulty: 3 Hard
2 Page 2 of Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat. The absolute value of the price elasticity of demand is closest to The price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. Therefore the price elasticity of demand is equal to ((43)/((4+3)/2))/((25,00020,000)/((25,000+20,000)/2)) or Difficulty: 3 Hard 4. If the price of the ipod falls by 3 percent and the price elasticity of demand for ipods is 2.0, then quantity demanded will fall by what percentage? 5 percent. 6 percent. 0.6 percent. 60 percent. The basic formula for price elasticity is the percentage change in quantity demanded divided by the percentage change in price. Substituting 2 for the price elasticity number (E), you have 2 = x/.03 =.06 or 6 percent. 5. Which of the following products will have more inelastic demand? New cars. Fresh flowers. Fast food. Medicines. Demand is more inelastic if there are fewer substitute goods; medicines are necessities and will have more inelastic
3 Page 3 of Higher prices will increase total revenue if Demand is elastic. Demand is unitary elastic. Demand is inelastic. The price elasticity of demand is zero. When demand is inelastic, this means that the quantity demanded does not fall by much when the price increases. So total revenue will increase with higher prices when demand is inelastic. A few buyers will refuse to pay the higher price, but most of them will continue to purchase the good. 7. Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5. You would advise Sam to Raise his price to increase revenues. Keep his price the same to maximize revenues. Lower his price to increase revenue. Offer more highpriced products. If the elasticity of demand is 3.5 (in absolute value), it indicates that demand is very elastic. Consumers have a lot of substitutes available. Therefore Sam should lower his price to increase total revenue because the quantity demanded will increase.
4 Page 4 of If the elasticity of demand for cigarettes is 0.4, a seller should Increase price to increase Decrease price to increase Reduce price to maximize profits. Increase price because the percentage change in quantity demanded will be greater than the price effect. If price elasticity of demand is 0.4, then demand is very inelastic. That means the seller can increase price and increase 9. On a demand curve, demand is more elastic At higher prices. At lower prices. When demand is unitary. At the middle price. At higher prices demand is more elastic along a linear or straight demand curve. Note that the price elasticity of demand changes along a straightline demand curve and is more elastic at higher prices, and more inelastic at lower prices.
5 Page 5 of In Figure 20.1, total revenue is maximized at the unit price of $50. $60. $80. $100. Revenue is equal to price times quantity. Revenue is $10,000 at a price of $100.
6 Page 6 of In Figure 20.1, at what price is the elasticity of demand unitary? $40. $100. $160. $200. At a price levels less than $100, a decrease in the price causes revenue to decrease, which implies that demand is inelastic. At price levels greater than $100, a decrease in the price causes revenue to increase, which implies that demand is elastic. Therefore, demand must be unitary elastic at a price of $100.
7 Page 7 of In the $80 to $40 price range in Figure 20.1, demand is Perfectly priceelastic. Priceinelastic. Unitary elastic. Priceelastic. At price levels less than $100, a decrease in the price causes revenue to decrease, which implies that demand is inelastic.
8 Page 8 of In the $160 to $180 price range in Figure 20.1, the absolute value of the price elasticity of demand is closest to The price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. Therefore, the price elasticity of demand is equal to the absolute value of ((2040)/((20+40)/2))/(( )/(( )/2)) or 5.7.
9 Page 9 of If the price is reduced from $100 to $80 in Figure 20.1, ceteris paribus, Total revenue will decrease. Demand will increase. Quantity demanded will decrease. Total revenue will increase. Revenue is equal to price times quantity. Revenue is $10,000 at a price of $100 and $9,600 at a price of $800.
10 Page 10 of A grocery store put salt on sale but found that total revenues fell. This can be explained by which of the following? The demand for salt is very elastic. The demand curve for salt is vertical. The demand for salt is inelastic. The demand for salt is unitary elastic. When demand is inelastic, consumers do not respond to a sale in a big way. So the quantity demanded does not increase much to a price decrease. This means that demand is inelastic for salt. 16. Assume apples and oranges are substitutes. Suppose apple growers launch a successful advertising campaign that convinces consumers apples are a better product. As a result the crossprice elasticity of apples and oranges will become Less negative (move closer to zero). More negative. Less positive (move closer to zero). More positive. If two goods are substitutes, the crossprice elasticity is positive. However, if the successful advertising campaign convinces consumers apples are a better product, a change in the price of oranges will not have much impact on the demand for apples. Learning Objective: What the crossprice elasticity of demand measures.
11 Page 11 of When the prices of postage stamps rise, the demand for Internet service increases, ceteris paribus. Postage stamps and Internet service are therefore Elastic. Inelastic. Complements. Substitutes. If the crossprice elasticity of demand is positive, an increase in the price of postage causes an increase in demand for Internet service, and the goods must be substitutes. Learning Objective: What the crossprice elasticity of demand measures. 18. If two goods are complementary goods, then The crossprice elasticity sign will be negative. The crossprice elasticity sign is not important. The crossprice elasticity sign will be positive. The crossprice elasticity will be greater than 1. If two goods are complementary goods, then the sign on the crossprice elasticity will be negative. For example, if the price of gasoline rises by 10 percent, the quantity demanded for gasguzzling trucks may fall by 20 percent. Notice that this is a positive divided by a negative, and the crossprice elasticity is 2. Learning Objective: What the crossprice elasticity of demand measures.
12 Page 12 of If two goods are substitute goods, The percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y. The percentage change in quantity demanded for good X will stay the same if there is an increase in the price of good Y. If the price of good X increases, the demand for good Y falls. The percentage change in quantity demanded for good X will rise if there is a reduction in the price of good Y. When two goods are substitutes, like Coke and Pepsi, if there is a percentage reduction in the price of Coke, the percentage change in quantity demanded of Pepsi will fall. Learning Objective: What the crossprice elasticity of demand measures. 20. If the price of Coke rises by 5 percent and the sales of Pepsi go up by 10 percent, we can conclude that The sign on the crossprice elasticity will be negative. Both goods are normal goods. Both goods are substitute goods because the crossprice elasticity is Both goods are substitute goods because the crossprice elasticity is +2. The formula for crossprice elasticity is the percentage change in the quantity demanded for Pepsi, divided by the percentage change in the price of Coke. So +10%/+5% = +2, and the two goods are substitutes. Learning Objective: What the crossprice elasticity of demand measures.
13 Page 13 of If income falls 4 percent for a year and as a result the quantity of new homes demanded falls from 23 million to 20 million units for the year, the value of the income elasticity of demand for new homes is closest to The income elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in income. When demand falls from 23 million to 20 million or 14 percent using the midpoint formula, the income elasticity of demand is roughly 14/4 or 3.5. Learning Objective: What the income elasticity of demand tells us. 22. If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent, New cars are a normal good, and the income elasticity is +.5. New cars are an inferior good, and the income elasticity is New cars are a normal good, and the income elasticity is New cars are an inferior good, and the income elasticity is The formula for income elasticity is the percentage change in quantity demanded for new cars divided by the percentage change in income. So 10%/5%= +2, which indicates that new cars are a normal good; the demand for them rises when incomes increase. Learning Objective: What the crossprice elasticity of demand measures. 23. If a good is normal, its Price elasticity of demand is positive. Income elasticity of demand is negative. Income elasticity of demand is positive. Crossprice elasticity is positive. For a normal good demand increases when income rises; therefore the ratio of the percentage change in quantity demanded divided by the percentage change in income will always be positive. Learning Objective: What the income elasticity of demand tells us.
14 Page 14 of If a good is inferior, its Crossprice elasticity is negative. Price elasticity of demand is negative. Income elasticity of demand is positive. Income elasticity of demand is negative. For an inferior good demand increases when income falls; therefore the ratio of the percentage change in quantity demanded divided by the percentage change in income will always be negative. Learning Objective: What the income elasticity of demand tells us. 25. If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is A normal good. An inferior good. An irregular good. A substandard good. If sales of a particular vehicle fall when incomes increase, the vehicle is an inferior good. Learning Objective: What the income elasticity of demand tells us. 26. Assume that store brand cereal is an inferior good. If income rises, then the price of store brand cereal will and the quantity sold of store brand cereal will. rise; rise rise; fall fall; fall fall; rise When incomes rise, people demand fewer inferior goods such spaghetti, discount clothes, and generic brand items. When demand for a good decreases, the price and equilibrium quantity will decrease. Learning Objective: What the income elasticity of demand tells us.
15 Page 15 of Elasticity of supply tells us How much sellers will increase production in response to a change in price. How much sellers will change their price as their quantity supplied changes. How much producers will increase production with changes in consumers' income. How much supply responds to a change in quantity demanded. Elasticity of supply looks at how responsive suppliers are to changes in price. If price rises, can producers increase supply easily or will it take a longer time to increase supply? Difficulty: 1 Easy Learning Objective: What the elasticity of supply measures. 28. Supply is very inelastic when The quantity supplied changes little when the price increases. The quantity supplied changes a lot when price increases. The quantity supplied does not change at all when price increases. The quantity supplied changes only when demand changes. Inelastic supply means that the quantity supplied by producers will change little when the price increases. For example, if natural gas prices rise, it may take producers a while to produce more if labor or equipment is scarce. Learning Objective: What the elasticity of supply measures. 29. In the article "After iphone Price Cut, Sales Are Up by 200 Percent," The demand for iphones is inelastic. The survey of quantity demanded after a price change for the iphones showed that iphones are an inferior good. The demand for iphones is highly elastic. There was no way to calculate the price elasticity of The quantity demanded for iphones increased 200 percent after a price cut. Demand is priceelastic when the percentage change in quantity demanded is larger than the percentage change in price.
16 Page 16 of The In The News article "Play Station 3 Sales More Than Double after Price Cut" indicated that The percentage change in price was greater than the percentage change in quantity demanded. The percentage change in quantity demanded was greater than the percentage change in price. The demand for the Play Station 3 consoles was inelastic. The percentage change in price was the same magnitude as the percentage change in quantity demanded. There was a huge sales response to the price cut for the Play Station consoles, indicating that demand was elastic. This indicates that the percentage change in quantity demanded was greater than the percentage change in price. 31. Nobel Prizewinning economist Gary Becker corrected President Clinton's elasticity estimate for cigarette smoking by Showing that cigarettes were actually priceelastic. Showing that the longrun response to a price increase in cigarettes was likely to be more elastic than the president had estimated. Showing that the demand for cigarettes in the short run was more inelastic than the president calculated. Correcting the president's math. The president's calculation for the price elasticity of demand for cigarettes ignored the longerterm impact of an increase in the price of a pack of cigarettes. Demand is more elastic over the longer term when smokers find ways to stop smoking. Dr. Becker's estimate of the longerrun elasticity was 0.8 rather than the president's calculation of 0.4. While this is still inelastic, the demand for cigarettes is less inelastic in the long run.
17 Page 17 of The article "SUV Sales Drop with Gasoline Price Rise" states That gasoline and SUV sales have a crossprice elasticity that is negative. That gasoline and SUVs are substitute goods. That the crossprice elasticity for SUVs and gasoline is positive. That a drop in the price of gasoline will have little impact on SUV sales. SUVs and gasoline are complementary goods in that they are purchased together. For complementary goods the crossprice elasticity is negative. If gasoline prices rise, the quantity demanded for SUVs will fall. Learning Objective: What the crossprice elasticity of demand measures. 33. In the article on SUV sales SUV sales are very responsive to gasoline, which is a substitute good to SUVs. SUV sales did not respond all that much to a rise in gasoline prices, indicating that demand is inelastic for SUVs. Gasoline and SUVs are complementary goods, and when the price of gasoline rose, the demand for SUVs fell. The sign on the crossprice elasticity formula will be positive for SUVs and gasoline. Gasoline and SUVs are complementary goods; they are purchased together. The sign on the crossprice elasticity for complements is negative. A rise in the price of gasoline (+) will cause a fall in the sales of SUVs ().
a. Meaning: The amount (as a percentage of total) that quantity demanded changes as price changes. b. Factors that make demand more price elastic
Things to know about elasticity. 1. Price elasticity of demand a. Meaning: The amount (as a percentage of total) that quantity demanded changes as price changes. b. Factors that make demand more price
More informationElasticity: The Responsiveness of Demand and Supply
Chapter 6 Elasticity: The Responsiveness of Demand and Supply Chapter Outline 61 LEARNING OBJECTIVE 61 The Price Elasticity of Demand and Its Measurement Learning Objective 1 Define the price elasticity
More informationPractice Questions Week 3 Day 1
Practice Questions Week 3 Day 1 Figure 41 Quantity Demanded $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 Price Per Pair Quantity Supplied 1. Figure 41 shows the supply and demand for socks. If a price
More informationChapter 5 Elasticity of Demand and Supply. These slides supplement the textbook, but should not replace reading the textbook
Chapter 5 Elasticity of Demand and Supply These slides supplement the textbook, but should not replace reading the textbook 1 What is total revenue? Price multiplied by the quantity sold at that price
More informationCHAPTER 4 ELASTICITY
CHAPTER 4 ELASTICITY Chapter in a Nutshell When economists use the word elasticity, they mean sensitivity. Price elasticity of demand is a measure of buyers sensitivity to price changes. The elasticity
More informationMidterm Exam #2. ECON 101, Section 2 summer 2004 Ying Gao. 1. Print your name and student ID number at the top of this cover sheet.
NAME: STUDENT ID: Midterm Exam #2 ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your
More informationEconomics 100 Exam 2
Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current
More informationGroup A (sales per week)
Practice Questions and Answers from Lesson I7: Elasticity The following questions practice these skills: Use the midpoint method for calculating percent change. Compute price elasticity of demand. Identify
More informationELASTICITY Microeconomics in Context (Goodwin, et al.), 3 rd Edition
Chapter 4 ELASTICITY Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Overview This chapter continues dealing with the demand and supply curves we learned about in Chapter 3. You will
More informationChapter 6. Elasticity: The Responsiveness of Demand and Supply
Chapter 6. Elasticity: The Responsiveness of Demand and Supply Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 202 504 Principles of Microeconomics Elasticity Demand curve:
More informationPAGE 1. Econ 2113  Test 2 Fall 2003 Dr. Rupp. Multiple Choice. 1. The price elasticity of demand measures
PAGE 1 Econ 2113  Test 2 Fall 2003 Dr. Rupp Multiple Choice 1. The price elasticity of demand measures a. how responsive buyers are to a change in income. b. how responsive sellers are to a change in
More informationElasticities of Demand and Supply
1 CHAPTER CHECKLIST Elasticities of Demand and Supply Chapter 5 1. Define, explain the factors that influence, and calculate the price elasticity of demand. 2. Define, explain the factors that influence,
More informationThe formula to measure the rice elastici coefficient is Percentage change in quantity demanded E= Percentage change in price
a CHAPTER 6: ELASTICITY, CONSUMER SURPLUS, AND PRODUCER SURPLUS Introduction Consumer responses to changes in prices, incomes, and prices of related products can be explained by the concept of elasticity.
More information17. Suppose demand is given by Q d = 400 15P + I, where Q d is quantity demanded, P is. I = 100, equilibrium quantity is A) 15 B) 20 C) 25 D) 30
Ch. 2 1. A relationship that shows the quantity of goods that consumers are willing to buy at different prices is the A) elasticity B) market demand curve C) market supply curve D) market equilibrium 2.
More information4 THE MARKET FORCES OF SUPPLY AND DEMAND
4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what
More information1. If the price elasticity of demand for a good is.75, the demand for the good can be described as: A) normal. B) elastic. C) inferior. D) inelastic.
Chapter 20: Demand and Supply: Elasticities and Applications Extra Multiple Choice Questions for Review 1. If the price elasticity of demand for a good is.75, the demand for the good can be described as:
More informationElasticity. I. What is Elasticity?
Elasticity I. What is Elasticity? The purpose of this section is to develop some general rules about elasticity, which may them be applied to the four different specific types of elasticity discussed in
More information100 = 100 = 6.25% and since the change in price is 10%, the price elasticity of demand for group A is = 0.625
S87S100_Krugman2e_PS_Ch06.qxp 9/16/08 9:20 PM Page S87 Elasticity chapter: 6 1. Nile.com, the online bookseller, wants to increase its total revenue. One strategy is to offer a 10% discount on every
More informationChapter 3 Market Demand, Supply, and Elasticity
Chapter 3 Market Demand, Supply, and Elasticity After reading chapter 3, MARKET DEMAND, SUPPLY, AND ELASTICITY, you should be able to: Discuss the Law of Demand and draw a Demand Curve. Distinguish between
More informationSupply Elasticity. Professor Charles Fusi
Demand and Supply Elasticity Professor Charles Fusi Economists have estimated that if the price of satellite delivered TV services decreases by a certain percentage, the demand for cable TV falls by about
More informationFigure 41 Price Quantity Quantity Per Pair Demanded Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8
Econ 101 Summer 2005 Inclass Assignment 2 & HW3 MULTIPLE CHOICE 1. A governmentimposed price ceiling set below the market's equilibrium price for a good will produce an excess supply of the good. a.
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Perfect Competition  Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a
More informationDemand, Supply and Elasticity
Demand, Supply and Elasticity CHAPTER 2 OUTLINE 2.1 Demand and Supply Definitions, Determinants and Disturbances 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities of Supply and
More information2011 Pearson Education. Elasticities of Demand and Supply: Today add elasticity and slope, cross elasticities
2011 Pearson Education Elasticities of Demand and Supply: Today add elasticity and slope, cross elasticities What Determines Elasticity? Influences on the price elasticity of demand fall into two categories:
More informationSUPPLY AND DEMAND : HOW MARKETS WORK
SUPPLY AND DEMAND : HOW MARKETS WORK Chapter 4 : The Market Forces of and and demand are the two words that economists use most often. and demand are the forces that make market economies work. Modern
More informationChapter 4 Supply and Demand Macroeconomics In Context (Goodwin, et al.)
Chapter 4 Supply and Demand Macroeconomics In Context (Goodwin, et al.) Chapter Overview In this chapter, you ll find the basics of supply and demand analysis. As you work through this chapter, you will
More informationChapter 3 Market Demand, Supply and Elasticity
Chapter 3 Market Demand, Supply and Elasticity Multiple Choice Questions Choose the one alternative that best completes the statement or answers the question. 1. Ceteris paribus means (a) other things
More information6. Which of the following is likely to be the price elasticity of demand for food? a. 5.2 b. 2.6 c. 1.8 d. 0.3
Exercise 2 Multiple Choice Questions. Choose the best answer. 1. If a change in the price of a good causes no change in total revenue a. the demand for the good must be elastic. b. the demand for the good
More informationElasticity. Demand is inelastic if it does not respond much to price changes, and elastic if demand changes a lot when the price changes.
Elasticity The price elasticity of demand measures the sensitivity of the quantity demanded to changes in the price. Demand is inelastic if it does not respond much to price changes, and elastic if demand
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 4  Elasticity  Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The slope of a demand curve depends on A) the units used
More information3. CONCEPT OF ELASTICITY
3. CONCET OF ELASTICIT The quantity demanded of a good is affected mainly by  changes in the price of a good,  changes in price of other goods,  changes in income and c  changes in other relevant factors.
More information17. If a good is normal, then the Engel curve A. Slopes upward B. Slopes downward C. Is vertical D. Is horizontal
Sample Exam 1 1. Suppose that when the price of hot dogs is $2 per package, there is a demand for 10,000 bags of hot dog buns. When the price of hot dogs is $3 per package, the demand for hot dog buns
More informationElasticity. Definition of the Price Elasticity of Demand: Formula for Elasticity: Types of Elasticity:
Elasticity efinition of the Elasticity of emand: The law of demand states that the quantity demanded of a good will vary inversely with the price of the good during a given time period, but it does not
More informationElasticity and Its Application
Elasticity and Its Application Chapter 5 All rights reserved. Copyright 2001 by Harcourt, Inc. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,
More informationPreTest Chapter 18 ed17
PreTest Chapter 18 ed17 Multiple Choice Questions 1. (Consider This) Elastic demand is analogous to a and inelastic demand to a. A. normal wrench; socket wrench B. Ace bandage; firm rubber tiedown C.
More informationEcon 101: Principles of Microeconomics
Econ 101: Principles of Microeconomics Chapter 16  Monopolistic Competition and Product Differentiation Fall 2010 Herriges (ISU) Ch. 16 Monopolistic Competition Fall 2010 1 / 18 Outline 1 What is Monopolistic
More informationHow to Study for Class 4: The Determinants of Demand and Supply
1 How to Study for Class 4: The Determinants of Demand and Supply Chapter 4 introduces the factors that will shift the shift plus two new elasticity concepts. 1. Begin by looking over the Objectives listed
More informationSolution of Economics HW2 Fall Term 2014 Answer:
Solution of Economics HW2 Fall Term 2014 1. Consider the market for minivans. For each of the event listed here, identify which of the determinants of demand or supply are affected. Also indicate whether
More information4 ELASTICITY. Chapter. Price Elasticity of Demand. A) more elastic. B) less elastic. C) neither more nor less elastic. D) undefined.
Chapter 4 ELASTICITY Price Elasticity of Demand Topic: The Price Elasticity of Demand 1) The slope of a demand curve depends on A) the units used to measure price and the units used to measure quantity.
More informationCHAPTER 5 WORKING WITH SUPPLY AND DEMAND Microeconomics in Context (Goodwin, et al.), 2 nd Edition
CHAPTER 5 WORKING WITH SUPPLY AND DEMAND Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Overview This chapter continues dealing with the demand and supply curves we learned about in
More informationOVERVIEW. 2. If demand is vertical, demand is perfectly inelastic. Every change in price brings no change in quantity.
7 PRICE ELASTICITY OVERVIEW 1. The elasticity of demand measures the responsiveness of 1 the buyer to a change in price. The coefficient of price elasticity is the percentage change in quantity divided
More informationElasticity. Ratio of Percentage Changes. Elasticity and Its Application. Price Elasticity of Demand. Price Elasticity of Demand. Elasticity...
Elasticity and Its Application Chapter 5 All rights reserved. Copyright 21 by Harcourt, Inc. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,
More informationProblems: Table 1: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2
Problems: Table 1: Labor Hours needed to make one Amount produced in 90 hours: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2 1. Refer to Table 1. For Carolyn, the opportunity cost of 1
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that
More informationPractice Questions Week 8 Day 1
Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants
More informationEconomy Microeconomics 05 Elasticity
Cover Page Economy Microeconomics 05 Elasticity Microeconomics Ch 05 Published 2015 About Us Powered by QuizOver.com The Leading Online Quiz & Exam Creator Create, Share and Discover Quizzes & Exams http://www.quizover.com
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 6  Markets in Action  Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The shortrun impact of the San Francisco earthquake
More informationChapter 03 The Concept of Elasticity and Consumer and
Chapter 03 The Concept of Elasticity and Consumer and Multiple Choice Questions Use the following Figure 3.1 to answer questions 14: Figure 3.1 1. In Figure 3.1, if demand is considered perfectly elastic,
More informationChapter 4 Elasticities of demand and supply. The price elasticity of demand
Chapter 4 Elasticities of demand and supply The price elasticity of demand measures the sensitivity of the quantity demanded of a good to a change in its price It is defined as: % change in quantity demanded
More information11 PERFECT COMPETITION. Chapter. Competition
Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat
More informationChapter 3. The Concept of Elasticity and Consumer and Producer Surplus. Chapter Objectives. Chapter Outline
Chapter 3 The Concept of Elasticity and Consumer and roducer Surplus Chapter Objectives After reading this chapter you should be able to Understand that elasticity, the responsiveness of quantity to changes
More informationChapter 14 Monopoly. 14.1 Monopoly and How It Arises
Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) A major characteristic of monopoly is A) a single seller of a product. B) multiple sellers of a product. C) two sellers of a product. D) a few sellers
More informationSuppose you are a seller with cost 13 who must pay a sales tax of 15. What is the lowest price you can sell at and not lose money?
Experiment 3 Suppose that sellers pay a tax of 15. If a seller with cost 5 sells to a buyer with value 45 at a price of 25, the seller earns a profit of and the buyer earns a profit of. Suppose you are
More information17. In class Edward discussed one way to reduce healthcare costs is to increases the supply of doctors. A) True B) False
Economics 2010 Sec 300 Second Midterm Fall 2009 Version B There are 58 questions on Version B The test bank questions and the questions we created are mixed together. Name: Date: 1. Lot of people exercise
More informationDemand, Supply, and Market Equilibrium
3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for $50 in 2000, but by 2003 the price had risen to $500 per kilogram. The price
More informationMICROECONOMIC PRINCIPLES SPRING 2001 MIDTERM ONE  Answers. February 16, 2001. Table One Labor Hours Needed to Make 1 Pounds Produced in 20 Hours
MICROECONOMIC PRINCIPLES SPRING 1 MIDTERM ONE  Answers February 1, 1 Multiple Choice. ( points each) Circle the correct response and write one or two sentences to explain your choice. Use graphs as appropriate.
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Econ 201 Practice Test 1 Professor V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Scarcity can best be defined as a situation in which:
More information1. Supply and demand are the most important concepts in economics.
Page 1 1. Supply and demand are the most important concepts in economics. 2. Markets and Competition a. Market is a group of buyers and sellers of a particular good or service. P. 66. b. These individuals
More informationAn increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.
1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.
More informationBPE_MIC1 Microeconomics 1 Fall Semester 2011
Masaryk University  Brno Department of Economics Faculty of Economics and Administration BPE_MIC1 Microeconomics 1 Fall Semester 2011 Final Exam  05.12.2011, 9:0010:30 a.m. Test A Guidelines and Rules:
More informationChapter 3 Quantitative Demand Analysis
Managerial Economics & Business Strategy Chapter 3 uantitative Demand Analysis McGrawHill/Irwin Copyright 2010 by the McGrawHill Companies, Inc. All rights reserved. Overview I. The Elasticity Concept
More informationChapter 9: Perfect Competition
Chapter 9: Perfect Competition Perfect Competition Law of One Price ShortRun Equilibrium LongRun Equilibrium Maximize Profit Market Equilibrium Constant Cost Industry Increasing Cost Industry Decreasing
More informationSupply and Demand Fundamental tool of economic analysis Used to discuss unemployment, value of $, protection of the environment, etc.
Supply and emand Fundamental tool of economic analysis Used to discuss unemployment, value of $, protection of the environment, etc. Chapter Outline: (a) emand is the consumer side of the market. (b) Supply
More informationChapter 4: Elasticity
Chapter : Elasticity Elasticity of eman: It measures the responsiveness of quantity emane (or eman) with respect to changes in its own price (or income or the price of some other commoity). Why is Elasticity
More informationCHAPTER 4 Elasticity, Consumer Surplus, and Producer Surplus
Part Two: Microeconomics of Product Markets CHAPTER 4 Elasticity, Consumer Surplus, and Producer Surplus 2010 McGrawHill Ryerson Ltd. Slides prepared by Bruno Fullone, George Brown College 1 In this chapter
More informationECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot
More informationChapter 7: Market Structures Section 1
Chapter 7: Market Structures Section 1 Key Terms perfect competition: a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices commodity:
More informationCHAPTER 4 Labor Demand Elasticities
CHAPTER 4 Labor Demand Elasticities In addition to the multiple choice problems listed below, complete the following end of chapter questions: Review questions 1,3, 4, 6 and 7. Problems 1, 2, 3 and 5.
More informationPractice Exam 1. 1. Economics is the study of choice under conditions of a. demand b. supply c. scarcity d. opportunity e.
Practice Exam 1 1. Economics is the study of choice under conditions of a. demand b. supply c. scarcity d. opportunity e. abundance 2. Suppose your friends take you out for dinner on your birthday and
More informationUTILITY AND DEMAND. Chapter. Household Consumption Choices
Chapter 7 UTILITY AND DEMAND Household Consumption Choices Topic: Consumption Possibilities 1) The level of utility a consumer can achieve is limited by A) prices only. B) income only. C) the consumer
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The law of demand states that, other things remaining the same, the lower the price of a good,
More information4. According to the graph, assume that Cliff and Paul were both producing wheat and corn, and each were dividing their time equally between the two. T
1. Your professor loves his work, teaching economics. He has been offered other positions in the corporate world making 25 percent more, but has decided to stay in teaching. His decision would not change
More informationChapter 4 Individual and Market Demand
Chapter 4 Individual and Market Demand Questions for Review 1. Explain the difference between each of the following terms: a. a price consumption curve and a demand curve The price consumption curve (PCC)
More informationDEMAND AND SUPPLY. Chapter. Markets and Prices. Demand. C) the price of a hot dog minus the price of a hamburger.
Chapter 3 DEMAND AND SUPPLY Markets and Prices Topic: Price and Opportunity Cost 1) A relative price is A) the slope of the demand curve B) the difference between one price and another C) the slope of
More informationMidterm Exam #1  Answers
Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.
More informationELASTICITY. Answers to the Review Quizzes. Page 92
C h a p t e r 4 ELASTICITY Answers to the Review Quizzes Page 92 1. Why do we need a unitsfree measure of the responsiveness of the quantity demanded of a good or service to a change in its price? The
More informationThe Free Market Approach. The Health Care Market. Sellers of Health Care. The Free Market Approach. Real Income
The Health Care Market Who are the buyers and sellers? Everyone is a potential buyer (consumer) of health care At any moment a buyer would be anybody who is ill or wanted preventive treatment such as a
More informationb. Cost of Any Action is measure in foregone opportunities c.,marginal costs and benefits in decision making
1 Economics 130Windward Community College Review Sheet for the Final Exam This final exam is comprehensive in nature and in scope. The test will be divided into two parts: a multiplechoice section and
More informationA. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.
1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change
More informationSection B. Some Basic Economic Concepts
This work is licensed under a Creative Commons AttributionNonCommercialShareAlike License. Your use of this material constitutes acceptance of that license and the conditions of use of materials on this
More informationPrinciples of Economics: Micro: Exam #2: Chapters 110 Page 1 of 9
Principles of Economics: Micro: Exam #2: Chapters 110 Page 1 of 9 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #2 must be completed within the allocated time (i.e., between
More informationConsumers face constraints on their choices because they have limited incomes.
Consumer Choice: the Demand Side of the Market Consumers face constraints on their choices because they have limited incomes. Wealthy and poor individuals have limited budgets relative to their desires.
More informationEcon 201 Exam 1 F2002 Professor Phil Miller Name: Student Number:
Econ 201 Exam 1 F2002 Professor Phil Miller Name: Student Number: Multiple Choice (3 points each) Directions: Identify the letter of the choice that best completes the statement or answers the question.
More informationManagerial Economics
Managerial Economics Unit 1: Demand Theory Rudolf WinterEbmer Johannes Kepler University Linz Winter Term 2012/13 WinterEbmer, Managerial Economics: Unit 1  Demand Theory 1 / 54 OBJECTIVES Explain the
More informationSupply and Demand. A market is a group of buyers and sellers of a particular good or service.
Supply and Demand A market is a group of buyers and sellers of a particular good or service. The definition of the good is a matter of judgement: Should different locations entail different goods (and
More informationECON 1100 Global Economics (Fall 2013) Surplus, Efficiency, and Deadweight Loss
ECON 11 Global Economics (Fall 213) Surplus, Efficiency, and Deadweight Loss Relevant Readings from the Required Textbooks: Economics Chapter 5, Surplus, Efficiency, and Deadweight Loss Definitions and
More informationAP Microeconomics Chapter 12 Outline
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
More informationQuantity of trips supplied (millions)
Taxes chapter: 7 1. The United tates imposes an excise tax on the sale of domestic airline tickets. Let s assume that in 2010 the total excise tax was $6.10 per airline ticket (consisting of the $3.60
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes
More informationSupply, Demand, Equilibrium, and Elasticity
The Meaning of Supply Supply describes the available goods and services in an economy. In a freemarket economy like the United States, firms tend to be the economic agents producing goods and services
More informationUniversity of Lethbridge  Department of Economics ECON 1010  Introduction to Microeconomics Instructor: Michael G. Lanyi. Lab #4
University of Lethbridge  Department of Economics ECON 1010  Introduction to Microeconomics Instructor: Michael G. Lanyi Lab #4 Chapter 4 Elasticity MULTIPLE CHOICE. Choose the one alternative that best
More informationPreTest Chapter 25 ed17
PreTest Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The fourfirm concentration ratio equals the percentage of the value of accounted for by the four
More informationAnswers to the Problems Chapter 3
Answers to the Problems Chapter 3 1. a. ½ pound of wool trades for 1 pound of butter trades. b. Butter is 40 a pound. c. Yes, many people would accept Mr. Gregg s offer. People could use $1.60 to buy 8
More informationMonopolistic Competition
In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what
More informationManagerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets
Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect
More informationQuantity Tax Incidence Subsidy Welfare Effects Case Study. Equilibrium Chapter 16
Equilibrium Chapter 16 Competitive Equilibrium: Motivating Questions Firms are pricetakers in competitive markets, but how is the market price (and quantity) determined? competitive equilibrium What happens
More informationChapter 6 Competitive Markets
Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a
More informationUniversity of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 3 Demand and Supply
University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi Chapter 3 Demand and Supply 1) The relative price of a good is all of the following
More informationChapter. Perfect Competition CHAPTER IN PERSPECTIVE
Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.
More information